Facebookbuys the iPhone app of the year in 2011 —-Instagram, for whooping purchase price of $1 billion will be paid in cash and Facebook shares.

According to Facebook’s Mark Zuckerberg:

This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.

We’re looking forward to working with the Instagram team and to all of the great new experiences we’re going to be able to build together.

For 18 months, Instagram have been on the limelight of photo sharing app gathering 30 million iOS users alone, not taking into consideration that the app have just debuted on the Android platform and got millions of downloads immediately.

According to recent company valuation done by Sequoia Capital, Thrive, Benchmark and Greylock, Instagram is reported worth $500 million. And Facebook got a seemingly preventive offer of twice the worth of the company (which totally a crazy number) against Google, Twitter and Microsoft eying to take over the Instagram. “Facebook has the money (almost $4 billion in cash on hand as of December 2011), and certainly isn’t desperate for more users, most if not all of whom are already on Facebook,” as cited in a Forbes’ report.

The bad news all be to Yahoo’s Flickr as Facebook is taking the photo space and Instagram acquisition might put the final puzzle to conclusive takedown, though we still see that the Facebook-Instagram integration will need fine tuning in terms of aesthetics such bigger resolution and detailed filter effects done on the image.